Life insurance is designed to protect a client’s future — a spouse, dependents, a home or business. But how do you approach a client who has none of these things? Generation Y (born between 1980 and 1992) is showing an increased interest in insurance and investing, but the emotional calls to action that work on their parents and grandparents have no pull with a client who hasn’t yet put down roots.
How do you change the conversation to reflect what matters to this generation?
Position it wisely
Gen Yers are in tune with their money — about 83 percent contribute to a 401(k) plan, and nearly 50 percent are auto-enrolled in a savings plan sponsored by their workplace. However, according to LIMRA, more than half of Gen Y households (about 30 million people) need more life insurance. To help Gen Y clients make the connection between financial planning and life insurance, focus on life insurance as a portfolio asset that helps secure retirement.
For example, indexed universal life (IUL), in which the accompanying cash value account is invested in the S&P 500, is a simple way to combine investing with life insurance coverage. Unlike an IRA or 401(k), there is no pre-set limit to the amount a client can contribute to the cash value account. The premium is paid on an after-tax basis, but your client can get tax-free distributions from the cash value account during retirement. I explain the value of IUL using a proprietary Monte Carlo comparison, showing historical data that doesn’t over-illustrate a product with high-interest projections.
Your Gen Y client may still ask, “What’s in it for me?” Answer this question by explaining the value of living benefits, such as long-term care, disability riders and return of premium. Long-term care and disability riders can help ease a Gen Y client’s worries about future changes in Social Security and Medicare. Return of premium functions as a sort of money-back guarantee that a financially cautious client will appreciate. Each of these policy additions offers your Gen Y client a tangible benefit accessible in his or her lifetime — and that’s what sells when a client doesn’t have much to protect.
Follow these selling steps
Armed with these positioning tools, let’s look at the nuts and bolts of making the sale.
Step 1: Ask, “Are You a HENRY?”
HENRY stands for “high earner, not rich yet.” This client has no dependents, makes $75,000-plus per year, and has disposable income. Although they aren’t rich yet, they have the potential to be. Make your client aware that others in this situation are already planning their financial futures … and in today’s tough economic climate, every day matters when it comes to retirement planning.
Step 2: Advise, “Get it while you’re young and healthy.”
Explain that buying any life insurance policy, including IUL, is most affordable when you’re young and healthy. The time to act is now. Securing a low rate makes the benefits of that policy less expensive than they would be later in life, when potential health problems change a client’s health class and rates.
Step 3: Warn, “Don’t make the mistake your parents made — start earlier.”
If there’s one thing a Gen Y client wants to avoid, it’s duplicating a parent’s mistakes. That includes investing too heavily in a volatile stock market that evaporates wealth when world events or digital traders send the market into a tailspin. It also includes waiting too long to create a diversified retirement portfolio. IUL, for example, mitigates risk and provides a smart strategy for supplementing retirement funds.
Bring it all together
To bring your positioning and sales tactics together for a Gen Y client, here’s a sample script that I might use in person or on the phone: “John, we need to look at utilizing life insurance to diversify your retirement portfolio. Life insurance is extremely tax- and growth-efficient, and it’s often overlooked because of its name. Imagine having tax-deferred growth, tax-free income during retirement and a death benefit assignable to a beneficiary. Your 401(k) is great, but you have downside exposure, and it isn’t the most tax-advantaged way to take your retirement income. With life insurance as an alternative retirement vehicle, you have all the advantages of a 401(k) with less downside risk.”
If you position life insurance as a low-risk retirement supplement rather than a vehicle for protecting a home and family, you’ll spark a Gen Y client’s interest. Always remember to emphasize linked benefits that answer the question, “What’s in it for me?”